FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 11: Promissory Notes, Simple Discount Notes, and the Discount Process

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 51

Multiple Choice

Review LaterAdd Note

Review Later

The effective rate of a $25,000 non-interest-bearing simple discount 10%, 90-day note is (round to the nearest hundredth of a percent) :

A) 10.62%
B) 10.0%
C) 10.8%
D) 10.26%
E) None of these

F) None of the above
G) B) and D)

Correct Answer

verified

Show Answer

Question 52

Multiple Choice

Review LaterAdd Note

Review Later

Jill Jones borrowed $18,000 for 180 days from Sovereign Bank. The bank discounts the note at 8%. The effective interest rate to the nearest hundredth percent is:

A) 8.33%
B) 8.32%
C) 8.23%
D) 8.31%
E) None of these

F) C) and D)
G) B) and E)

Correct Answer

verified

Show Answer

Question 53

Short Answer

Review LaterAdd Note

The face value of a simple discount note is $12,000. The discount is 6½% for 90 days. Use ordinary interest. Calculate the following: A. Amount of interest charged for each note B. Amount borrower would receive C. Amount payee would receive at maturity D. Effective rate (to the nearest tenth percent)

J. Ryan discounts an 80-day note for $15,000 at 12%. The bank discount is (assume ordinary interest) :

Lisa Davidson signed a $12,000 note from Springfield National Bank at a 5% discount for 222 days (assume 360 days in a year). Calculate the bank discount.

The payee of a promissory note is extending the credit.

Match the following terms with their definitions. -Bank discount

Use ordinary interest: $\begin{array} { | l | l | l | l | l | l | l | l | } \hline & \text { Rate of } & & \text { Maturity } & \text { Date Note } & \text { Date Note } & \text { Discount } & \\ \text { Principal } & \text { Interest } & \text { Time } & \text { Value } & \text { Made } & \text { Discounted } & \text { Period } & \text { Proceeds } \\\hline \$ 70,000 & 11 \% & 90 \text { days } & \text { A } & \text { Mar } 10 & \text { April 15 } & \text { B } & \text { C } \\\hline\end{array}$ Note to be discounted at 10%

Juan-Solez, a prominent painter, takes out a simple discount note for one year from River National Bank for $5,000. The annual rate of interest is 8%. What is the amount of: A. Bank discount B. Proceeds C. Effective rate of interest (to nearest tenth percent)

Match the following terms with their definitions. -Maturity value

Maturity value of a non-interest-bearing note is:

The maturity date of a promissory note represents when only the principal is due.

Lines of credit provide companies with additional financing that is immediately available to them.

Match the following terms with their definitions. -Maturity date

Compute bank discount using (A)ordinary interest, (B)proceeds, and (C)effective interest rate to nearest hundredth. Do not round denominator in your calculation. $\begin{array} { | l | l | l | } \hline \text { Face Value } & \text { Discount Rate } & \text { Time in Days } \\\hline \$ 12,000 & 13 \% & 120 \\\hline\end{array}$

Ray Furniture wants to buy a dining room set for $7,000 with a 20% trade discount. Ray needs the cash to pay the bill and is considering discounting a 90-day note dated May 12, with a maturity value of $6,500 at Hunt Bank at a discount rate of 13% on June 5. The bank discount if Ray discounts the note is:

Jill Corporation accepted a $16,000 note on Aug. 12. Terms of the note were 13% for 100 days. Jill discounted the note on September 28, at the Reno Bank at 14%. The proceeds to Jill would be:

A $15,000, 6%, 50-day note dated November 8, is discounted at 5% on November 28. The proceeds of the note would be:

On March 12, Bill Jones accepted a $12,000 note in granting a time extension of a bill for goods purchased by Ron Prentice. Terms of the note were 13% for 90 days. On April 24, Bill could no longer wait for the money and discounted the note at Able Bank at a discount rate of 14%. The proceeds to Bill are:

In discounting an interest-bearing note, the discount period represents: